Redundancy - A Guide for Employers & Managers

Making people redundant is probably the hardest job for a Manager to undertake, particularly where good relationships have developed with staff. People generally find redundancy a traumatic experience, but nowadays there are few organisations that can avoid making redundancies at some stage. Following a laid down fair and consistent procedure will greatly help employers deal with this sensitive and difficult time.

How the redundancy exercise is managed will also leave a long term and significant impression on the remaining staff. If not handled well it will almost certainly disillusion those staying with the Company. Conversely, if the exercise is dealt with in a proper and professional way it will help staff move forward with renewed confidence in the Company.

Redundancy Situation

The redundancy process is set out in the Employments Rights Act 1996. Employees have the legal right to be consulted and to receive redundancy payments, if eligible. Redundancy can arise where the dismissal is due to:

Closure of the employer’s business
Closure of the employee’s department or place of work
Work of a particular nature ceasing, diminishing or expected to diminish
The requirements of a business for the employee to carry out work of a particular kind, in the place where they are employed is ceasing, diminishing or expected to diminish

Redundancy Exercise - 20 or More Employees at Risk

Where there are 20 or more employees at risk of redundancy at one establishment over a period of 90 days or less the company must notify BERR (formerly Department of Trade and Industry).

The employer should consult with Representatives or Trade Unions where recognised and take into account any collective redundancy arrangement. Where affected employees fail to elect Representatives (or they are not represented by a Trade Union or the employee does not wish to be represented) the company must follow a statutory dismissal procedure on an individual basis:

Step 1 - the employee must be notified of the reason for the redundancy (confirmed in writing) and invited to a meeting or a series of meetings to discuss (see consultation)
Step 2 - Hold a meeting or meetings with the “at risk” employee. The meeting or meetings should cover the criteria being used and what alternative options other than redundancy are being considered. The right of appeal must be given
Step 3 - If necessary hold an appeal hearing where the employee has the right to be accompanied

Redundancy Exercise – 19 or Less Employees at Risk

Where there are 19 or less Employees at risk of redundancy at one establishment over a period of 90 days or less the Company should consult with the affected or potentially affected employee on an individual basis.

Consultation

In all companies, regardless of size and the number of employees to be dismissed, employers should consult with appropriate trade unions, employee representatives or individual employees as soon as practicable and as fully as possible

Where 20-99 employees are to be made redundant at one establish over a period of 90 days or less, then consultation should start at least 30 days before the first dismissal
Where 100 plus employees are to be made redundant at one establishment over a period of 90 days or less then consultation should start at least 90 days before the first dismissal

During Consultation the Company Should Provide:

The reasons for the proposed redundancies
The numbers and positions of employees it is proposing to dismiss as redundant
The total number of employees employed at the establishment in question
The proposed method of selecting the employees who may be dismissed
The proposed method of carrying out the dismissals taking account of any agreed procedure including the period over which dismissals are to take effect
The proposed method of calculating redundancy payments

Redundancy Selection

Where there are several positions to be made redundant, the Company should apply consistent selection criteria. The purpose of having objective criteria is to ensure that Employees are not unfairly selected for redundancy. The following areas are examples of such criteria that may be used:

Skills
Qualifications
Attendance record
Disciplinary record

Redundancy Pay (see ready reckoner below)

Employees are entitled to receive statutory redundancy pay according to their age and length of service. Note since the introduction of the Employment Equality (Age Regulations) October 2006 the statutory pay no longer has the minimum or maximum age bands of 18 or 65

Common Errors made by Employers

Complaints to a tribunal are often caused by employers:

Failing to follow a fair and consistent redundancy procedure
Dismissing employees where there is not a genuine redundancy situation at all
Selecting the employee for an automatically unfair reason
Failing to use objective and consistent selection criteria when selecting employees
Making employees redundant too quickly, without proper consultation
Failing to try and find alternative positions within the company or group of companies

Policy and Procedure

Set out a standard process and details legal action required by the Employer and/or Manager when conducting a redundancy exercise
APS Letters and Forms
Provide all the legally essential letters involved in the redundancy exercise
Redundancy selection form with criteria and scoring including examples for completion
Discussion checklists covering all formal meetings at various stages, an essential tool to help the employer manage the redundancy process

Failure to follow these steps could result in the employee making a claim to a Tribunal, where the dismissal will be ruled as “automatically unfair” and the employee may be awarded compensation.

Statutory Redundancy Pay Table (From February 2009)

To calculate the number of weeks redundancy pay, cross reference the person's age and years of service and then multiply that number by the weekly salary (maximum weekly salary is £350). For example a person with a salary of £200 aged 22 with 4 years of service will be entitled to two weeks salary eg total redundancy pay of £400

The maximum number is 30 weeks redundancy x £350 max weekly salary equating to £10500 from 1 February
17* - The table starts at age 17, as it is possible for a 17 year old to have 2 years service. Compulsory school leaving age can be 153/4 or 154/5 where a child is 16 before 1 September. Particular care should be taken when calculating an individual’s redundancy pay when they joined as an employee below the age of 16
61* - The table stops at age 61 because for employees age 61 and over, the payment remains the same as for age 61.